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A naked option involving a "call" is called a "naked call" or "uncovered call", while one involving a "put" is a "naked put" or "uncovered put". [1] The naked option is one of riskiest options strategies, and therefore most brokers restrict them to only those traders that have the highest options level approval and have a margin account. Naked ...
Long 1 call with a strike price of (X − a) Short 2 calls with a strike price of X; Long 1 call with a strike price of (X + a) where X = the spot price (i.e. current market price of underlying) and a > 0. Using put–call parity a long butterfly can also be created as follows: Long 1 put with a strike price of (X + a) Short 2 puts with a ...
One short call contract yields a premium of $200, or $2 * 1 contract * 100 shares. ... Before that happens, however, your broker will issue a margin call, but it still could wipe out your account ...
And, suppose for the bear call portion of the iron condor a call option with a strike price of $100 for GHI stock is sold at $1.00 and a call option for GHI with a strike price of $110 is purchased for $0.50, and at the option's expiration the price of the stock or index is greater than the short put strike price of $90 and less than the short ...
Margin loan rates for small investors generally range from as low as 6 percent to more than 13 percent, depending on the broker. Since these rates are usually tied to the federal funds rate, the ...
If a margin account with your broker runs short of funds, you could face a margin call. Here’s what that means. ... 24/7 Help. For premium support please call: 800-290-4726 more ways to reach us ...
This difference has to stay above a minimum margin requirement, the purpose of which is to protect the broker against a fall in the value of the securities to the point that the investor can no longer cover the loan. Margin lending became popular in the late 1800s as a means to finance railroads. [1] In the 1920s, margin requirements were loose.
Special memorandum account (SMA) [1] is a margin credit account used for calculating US Regulation T requirements on brokerage accounts. In addition to Initial Margin and Maintenance Margin requirements, the SMA ledger is used to lock in unrealized gains that augment the client's buying power. According to Regulation T, Section 220.5: [2]